Correlation Between SW Seed and CHS
Can any of the company-specific risk be diversified away by investing in both SW Seed and CHS at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SW Seed and CHS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SW Seed Company and CHS Inc CN, you can compare the effects of market volatilities on SW Seed and CHS and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SW Seed with a short position of CHS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SW Seed and CHS.
Diversification Opportunities for SW Seed and CHS
Very good diversification
The 3 months correlation between SANW and CHS is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding SW Seed Company and CHS Inc CN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHS Inc CN and SW Seed is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SW Seed Company are associated (or correlated) with CHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHS Inc CN has no effect on the direction of SW Seed i.e., SW Seed and CHS go up and down completely randomly.
Pair Corralation between SW Seed and CHS
Given the investment horizon of 90 days SW Seed Company is expected to under-perform the CHS. In addition to that, SW Seed is 12.93 times more volatile than CHS Inc CN. It trades about -0.03 of its total potential returns per unit of risk. CHS Inc CN is currently generating about 0.05 per unit of volatility. If you would invest 2,322 in CHS Inc CN on September 12, 2024 and sell it today you would earn a total of 229.00 from holding CHS Inc CN or generate 9.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SW Seed Company vs. CHS Inc CN
Performance |
| Timeline |
| SW Seed Company |
| CHS Inc CN |
SW Seed and CHS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SW Seed and CHS
The main advantage of trading using opposite SW Seed and CHS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SW Seed position performs unexpectedly, CHS can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CHS will offset losses from the drop in CHS's long position.The idea behind SW Seed Company and CHS Inc CN pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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